On no demand of service tax, there can't be any penalty, HC

Facts in Brief:

1. This appeal has been filed against t, passed by the Commissioner of Service Tax, Bangalore.

2. Shri K. Parameswaran, learned Advocate appeared on behalf of appellants and Ms. Sudha Koka, learned SDR for the Revenue.

3. The appellants, M/s Price Water House Coopers Development Association Ltd. are the service providers under the category of "Management Consultancy Services".

HC held as under,

4. The issue involved in this case is that whether the payment of service tax on the service charges realized has been made by the due date and in the case of delayed payments, whether the interest at the applicable rate has been discharged. For this reason, I have verified the invoices raised for the service charges during the relevant period in question and the vouchers of money realization by the Company vis-a-vis the payment of service tax made through their TR 6 challans produced and found that in some cases, they have discharged the service tax in time and in some cases they have delayed the payments. In the case of delayed payments, they have paid the interest at the applicable rate.

5. It is also observed that there was no suppression of the material fact as alleged in the show cause notice in as much as it is found correct that whatever service charge realized during the relevant period from August 2001 to July 2002, they have discharged the service tax in full along with the interest at the applicable rate. Hence the show cause notice for the recovery of short payment of service tax does not arise. However, there was lapse oh the part of the noticee in having delayed the payment of service tax and in filing the ST-3 return for the relevant period which has entailed to initiate penal proceedings as stipulated under Section 76 and 77 of the Finance Act.

6. On a careful consideration of the matter, we find that the order of the original authority is legal and proper. He has correctly appreciated the facts after verification and dropped the proceedings. It is very clear that there is actually no intention to evade payment of service tax. In our view, the Order-in-Revision cannot be sustained for the following reasons. The original authority has found that the service tax along with interest has already been paid by the appellants. Therefore he has rightly dropped the demand as the amount of service tax had already been paid.

7. When there is no demand of service tax, there cannot be any penalty. The case laws cited are very relevant as the appellants on their own discharged the tax liability well before the issue of show cause notice. The impugned order cannot be upheld. Hence we allow the appeal with consequential relief. 

Case Reference - Price Water House Coopers ... vs The Commissioner Of Service Tax.